Trustees: Without Reforms, Medicare Faces Steep Cuts in 2024

Michael Warren

June 22, 2011 5:19 PM

At a House Ways and Means Committee hearing today, two Medicare trustees, Charles Blahous and Robert Reischauer, testified about necessary cuts to Medicare's Hospital Insurance program (commonly known as Medicare Part A) once the trust fund runs out of money. According to the recently released Medicare trustees' report, Part A is expected to exhaust the trust fund in 2024. Prompted by Peter Roskam (R-Ill.), Blahous and Reischauer testified that the expected real cuts to Medicare will be an average of 17 percent over the next 75 years.

"Medicare as we know it will end in 2024, absent some change in policy or some change in moving forward. That’s right, isn’t it?" asked Roskam. "Yes," replied Blahous.

Here's a transcript of the key exchange at the end:

Roskam: So that cut just so I’m clear, is not a hypothetical cut, it’s not a hypothetical delay, it’s an actual delay in payment to the point of reaching this 17-percent number based on your own projection. Is that right?

Blahous: That’s right. The Social Security Act which deals with these trust fund issues is very explicit that payments can only be made from the trust funds.

Roskam: So there’s no other flexibility. If the revenues aren’t there, if an insolvency is declared, you have no other remedy but to move forward and make those cuts. Is that right?

Blahous: Right. The programs don’t have the authority to borrow in excess of the resources provided by the trust funds.

Roskam: And absent some change in the program your prediction is that is where our nation will be in 2024. That’s right?

Blahous: That’s right.

Reischauer: With respect to the hospital insurance system.

Roskam: I understand. So when the gentleman from Wisconsin [Democrat Ron Kind] said that there’s a proposal that’s out there by the Majority on this Committee that ends Medicare. In fact, Medicare as we know it will end in 2024, absent some change in policy or some change in moving forward. That’s right isn’t it?